Wall Street players and much of the business press celebrated Pfizer’s recent acquisition of Wyeth. But the $68 billion megamerger doesn’t mean that happy days are here again, even if Pfizer was able to get some bank financing. Rather, it underscores much of what has gone wrong in American business. It’s also a window into key problems that make the American healthcare system sick and unsustainable.

In the days when Americans had a clear understanding of anti-trust enforcement as an underpinning of a healthy market, the Pfizer deal would have been labeled what it is: an anti-competitive merger. Pfizer gets to acquire, and eliminate, a rival. That means fewer choices for consumers, less innovation, less competition, fewer new ideas — including of how to run a big pharmaceutical company. Pfizer is trying to buy its way out of a self-made hole.

We’ve seen this increasingly become the model of large American companies. Its dangers and downsides were articulated well in The Bigness Complex: Industry, Lobar, and Government in the American Economy, the 1986 book by Walter Adams and James Brock. The Reagan era loosened antitrust and fair trade laws, while deregulating industries and enhancing the tax incentives for mergers. Since then, the pace of consolidation has only increased, leading to the largest concentration in history in many industries. As Adams and Brock made clear, “gigantism” actually undermines efficiency and productivity — and is indeed a threat to democracy.

Other scholars have documented how big mergers fail to deliver their promised benefits to shareholders (Pfizer immediately cut its dividend in half). And to make the deals “work” economically, draconian job cuts are required. The new Pfizer will cut at least 19,000 jobs.

Who benefits?

Wall Street investment bankers and lawyers, who increasingly became peddlers of deals for deal’s sake. Top executives who walk away with golden parachutes — Wyeth’s Bernard J. Poussot will get $18.3 million for not keeping his company independent (down from the $38 million incentive to do a deal last year, before the board reigned in the compansation a tad). Short-term players, especially institutions, that buy shares not to be real stockholders, but to push for a merger and pocket the short-term gains.

This behavior has been a major piece of the remaking of the American economy from one based on producing things of real value to one of financial plays, “services” and distributorships of goods from abroad. In banking, airlines, media, telecommunications, defense contractors, computer-makers, consumer products — the list is long — this consolidation scenario has been played out. The consequences have been painfully localized, as cities and towns lost the headquarters that provided their best-paid jobs and community leadership. And they have been national, in an economy that’s less competitive, as well as one with the greatest wealth disparity as any seen since the 1920s. In the case of the banking industry, it has created institutions so large and a groupthink so tilted toward swindles that it endangers the entire financial system.

Pfizer has long been an actor in the drama, buying Warner-Lambert in 2ooo and Pharmacia in 2003. These job-and-rival killing deals didn’t keep the wolves away. Like much of Big Pharma, Pfizer faces lost revenue as its patents expire. Because it has promised huge profit margins to Wall Street, it has to keep the high going somehow — rather like an addict. As with many of its peers, it has been pouring money into marketing and buying physicians’ favorable endorsements, instead of into research. As Maggie Mahar points out in her essential book Money Driven Medicine, Pfizer spent $2.84 billion promoting its products in 2003, the fourth-biggest ad budget in the country. Pfizer employed 38,000 sales reps in 2005. When top executives weren’t pushing sales, they were scouting mergers.

No wonder Pfizer finds itself setting aside $2.3 billion to settle a federal probe into illegal marketing of its painkiller Bextra. The company paid an additional $894 million to settle suits over the drug, as well as paying 33 states $60 million. A lot of talented researchers that money would have funded. Instead, that work will be done by smaller biotech firms — and by competitors overseas that want to make something other than deals.